Looking for the MOQ meaning and what it stands for? You’ve come to the right place.
If you are manufacturing private label products yourself, you will most likely hear the term “MOQ” thrown around from time to time. The letters stand for Minimum Order Quantity, which refers to the number of units that a supplier can produce and (or) deliver at once.
Currencies can also define MOQs based on the amount of products that a customer would have to spend to meet the MOQ. This could be as little as $20 or as high as $2,000, it all just depends on the factory that you’re dealing with.
In short, MOQs are in place to help ensure that manufacturers only accept orders that will be profitable for them. But why are they necessary? Are they advantageous to your business as an Amazon seller, and are they negotiable?
Here’s everything you need to know about MOQ for Amazon sellers.
MOQ Meaning – What’s the Point in Having it?
If you’re an Amazon seller, you might be wondering if there’s any actual benefits for suppliers having MOQs set in place. Some entrepreneurs may find these figures inconvenient and arbitrary to a certain extent. However, these are in place for a reason.
Production Costs
Normally these are set to cover the overall production costs of a manufacturer. Without this, they wouldn’t be able to earn a reliable profit every time a production run launches.
Say a supplier set up their MOQ. The supplier then has to consider how much it will cost for their team to manufacture a unit. This will help them find out if they are expected to build less units than their MOQ states because this would mean a loss – which is not good!
Scale
The scale of your supplier’s factory can be the factor that determines their MOQ. This supplier may truly have a set minimum that represents the lowest number of units that they can produce for a single run. Even the smaller manufacturers will tend to produce their items in bulk, which means they still have to buy a lot of materials.
Thus, it isn’t cost-effective for these businesses to set up and run their machinery until they are guaranteed to profit from their compensation.
Negotiating MOQs
However, these factors do not mean that MOQs are set in stone; MOQs can be negotiable. The wiggle room varies between suppliers, but it always comes down to you taking the reins and kicking off the conversation that proposes something reasonable for all parties involved.
Because MOQs vary from supplier to supplier, some places may have lower MOQs that stay in the hundreds (or even just the tens), and others can be incredibly high numbers going up to the thousands.
This is a diverse area, indeed. You’ll have to dedicate time to find the right supplier for you, which means a company you can afford that will manufacture the number of goods you need.
Pros
Reasonable Price Per Unit
One of the biggest advantages of utilizing a manufacturer with a MOQ is that you can reap the best PPUs when purchasing in bulk. The more you buy, the better the deal value will be.
Great for Large Companies
Larger companies will always benefit from the amazing price per unit values when buying in bulk. Big companies often have to stock a large quantity of merchandise. This also means they’ll have a more significant profit margin, which is a win-win!
Cons
You Have to Pay Upfront
While you do save some money going this route, you also have to be prepared to pay for all of the merchandise upfront. For businesses who are just starting up, this can throw a major wrench into your plans.
There May be Hidden Costs
Most of the time, fee quotes that you get don’t even include shipping costs. When you order goods from all over the world, you’ll also have to shell out the money needed for the necessary customs paperwork. Just make sure to bring up these concerns when in negotiations with your supplier.
When Only Small Amounts of Stock Are Needed
New businesses that are just getting started probably won’t need a large number of units to get themselves started. Because of this, they probably won’t be able to afford a manufacturer’s MOQs. If you find yourself in this dilemma, try getting in contact with them and be transparent about your situation.
If this doesn’t get a reasonable negotiation started, unfortunately, you’ll have to find a different supplier that is better suited to your growing business model.
There are many suppliers out there that cater to lower MOQ needs; you just need to be patient and keep looking. However, make sure you understand your niche well enough to know that this is the best bet for you.
If you want to pursue a lower MOQ producer, resign yourself now to the fact that you will have to do extensive research. Head over to Google and take some time to scroll through the many directories of online supplier options.
If you don’t find yourself any closer to your goal after that, you will have to commit to a wholesaler such as AliExpress. With this route, you will probably place orders on a unit by unit basis, which removes troublesome MOQs from the equation entirely.
While this is convenient, it is not without its drawbacks. Wholesalers tend not to be as cost-effective as a manufacturer – however, in this example, startups are the exception. By purchasing merchandise as you need, you expose yourself to a lot less risk than mass-buying upfront.
Further reading: Alibaba Vs AliExpress – Whats the difference?
Should I Choose a Supplier With a Low MOQ?
If you are in the beginning stage of growing your business and purchasing products from a manufacturer is outside your scope, wholesale sellers could be just what you need. Entrepreneurs tend to love this option more than others because they can buy their goods individually rather than dropping the money needed for bulk-ordering.
What is MOQ meaning?
MOQ means the minimum order quantity or the smaller number of units that a company will supply. e.g On Alibaba the MOQ may be 2 units. Meaning you must order 2 units to get the MOQ $ pricing.
The Takeaway
Hopefully, we have helped you to understand the overall purpose and meaning of MOQ. A supplier often sets MOQs for a specific reason. So even if you’re in a frank negotiation phase, make sure you aren’t expecting anything unrealistic from your manufacturer.
Remember, if a supplier’s numbers are simply out of your reach, it is best to reach out to a new manufacturer. MOQs are put in place to take care of day to day business, so it should be something that suits your business model just as well.
Ultimately, the best decision as an Amazon seller will be the most cost-effective and reliable solution for your current position. Do the research, negotiate respectively, and you never know what kind of deal you can strike!
Similar post that may be of interest to you:
